The “Oracle of Omaha,” Warren Buffett, talked the U.S. government bailout of mortgage giants Fannie Mae and Freddie Mac, and stocks, with the Wall Street Journal’s Brett Arends on Tuesday. Arends wrote this morning:

Super-billionaire Warren Buffett warns that the federal bailout of Fannie Mae and Freddie Mac could end up costing the taxpayers “hundreds of billions of dollars” if the housing market continues to slump. But Buffett, the world’s richest man, defended the controversial bailout as necessary nonetheless.

“It all depends on what housing does,” he told me from the sidelines of Boston’s Fenway Park, where he was appearing to throw out the ceremonial first pitch on Tuesday night. “If housing falls off another 15 or 20%, they’re going to lose some real money” on the bailout. (The “they” means “the government,” which actually means, “you”). “It could get into the hundreds of billions,” he said. But “if housing is close to bottoming, they might not lose much money at all.” The federal government stepped in over the weekend to backstop the two home loan giants, putting them into conservatorship and taking over most of the equity. “We’d be crazy not to come a solution on this,” Buffett said. Otherwise there would be “$5trn… of troubled instruments,” on the market, he said, referring to the mortgage giants’ liabilities.

The CEO of Berkshire Hathaway also discussed stocks with the Journal columnist. Arends wrote:

Buffett declined to call turns in the housing or stock markets, but in relation to the latter he did have some heartening news for value investors. “I see value in a few places,” he said.

Source:

“What does Warren Buffett think about the market?”
Brett Arends
Wall Street Journal, September 11, 2008

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